Does Anyone feel like Bailing

[tw]

Originally Posted by sugarpop

hey, I agree with you. But to answer your questions, did I see the crash in 2005? No, but I don't work in finance, banking or housing. IF I had known they were bundling mortgages and selling them over and over again, and they weren't checking people's income to see if they could even afford to buy a house, and mortgage lenders were creating loans where payments would balloon in a few years, and they were coercing some people into these loans who did not understand them, then I would have seen it, yes.

Posted in 7 Sept 2006 in
Which is your favorite paranoid fantasy?

Originally Posted by tw

Has good news in this economy been based in productive activities? Well, incomes have been dropping for the past five years. So why the strong housing market? Was that housing market due to productive and necessary products - or just wild speculation? ...

Those who otherwise could not afford the home and those who were only buying on speculation will suffer. Big part of the American economy that has been its 'engine' may collapse. That is the economic fear to a flurry of bankruptcies, a collapse of industries that kept the American economy looking good, and maybe a major recession. ...

Any one of three things may happen. Housing prices drop leaving massive debts for homeowners - maybe a house worth less than its mortgage. Rents skyrocket. Third is inflation resulting in much higher interest rates. We already see inflation jolting upward AND massive American dollars overseas waiting for what?

Nobody really knew how much worse the economy had been made because Enron accounting and other money games were openly encouraged even at highest levels in government. Meanwhile, notice how many even denied that mild warning in 2006.

We knew a downturn was coming. We just had no idea how severe it would be because fraud was almost everywhere in the finance industry. Obvious in facts and numbers posted in those 2006 responses: downturn was pending. After all, that is what even tax cuts create once we eliminate rhetoric from those inspired by politicians. Any yet in the face of such facts, many (and from my perspective - most) still remained in denial.

Even Greenspan, who did not believe outrageous fraud had been all but encouraged by government, said finance people in free markets can be trusted. Greenspan could not believe people would promote or sign into an ARM. It just made no sense - except where political spin had even promoted houses as an investment. (If not yet obvious - housing never was investment.) Obvious was a pending downturn. But those who should have known it would remain openly in denial. Those who knew the entire financial industry was mostly wealth created by toxic (fictional) assets (ie CDOs, SIVs) attached to nothing of physical value - they were most in denial.

The lesson is obvious - your stock broker, investment banker, or financial consultant is typically the worst person to consult for financial advice. These people are mostly either ignorant of basic economics or have interested contrary to yours.

View that discussion even in July 2006 where I knew something bad was pending - with reasons why. Obvious even to me without any finance training or industry experience. But then I do not entertain my emotions AND do not listen to political hype, conclusions without reasons and numbers, and other junk science myths. One need not be in the industry to know something bad was coming. (Even I did not realize in 2006 how much worse it would be.)

Without finance knowledge, I did something I never do. Early last year (2008), I sold all investments. Without any financial knowledge and a contempt for brokers who really have no economic knowledge (who are only salesmen), I did something completely contrary to my investment philosophies - that I never did in generations. I got out because this market was obviously in a dangerous and unstable state due to too much MBA thinking and too few productive companies. Because I have contempt for political spin, the economy was in trouble.

The point: yes most who ignored facts and numbers - who were the problem and preached the party line - could not see it coming even thought facts and numbers were screaming otherwise. No, I too had no reason to know it would be this bad. But remember, finance people (some of the least economically knowledgeable and trustworthy) are promoting another obvious myth about a recovery in 2009 or 2010. Economists are saying otherwise. But again, finance people are not driven by knowledge even when facts and numbers bluntly say otherwise.

With basic knowledge (in or out of the finance industry), obvious was a housing bubble that had to crash because housing prices were 40% too high. Obvious was that all housing prices had to fall at least 20%. Obvious. And then we learned finance people did only what finance people routinely do - outright fraud and corruption. Mortgage backed securities and other intentional lies intended first or only to enrich finance people (despite what finance people said or believed).

Predicting a pending housing crisis in 2005 did not require finance wizardry. It required one to think logically and to not believe the so called experts who really don't understand basic economics (ie what was posted in mid July 2006) and whose interests are too often contrary to others.

This completes a response to question one. What you saw in 2005 is typical because we tend to deny facts and even listen to people whose interests are often contrary to America. A long reply because this quite simple concept still remains too new or radical to some. But again, read that 2006 discussion to appreciate why housing problem should have been obvious to laymen even in 2005.

Originally Posted by tw

You are suppose to say that a so called 'booming' economy was partially due to people taking houses they could not afford. A later resulting recession created by an economy today inflated by wild and irresponsible government spending and other financial instruments that create only paper wealth.

Thread title was Paranoid Fantasy? Yes, to so many in 2006 who remained in denial of facts that everyone could /should have known.